EVATT FOUNDATION NSW PARLIAMENT LECTURE

I acknowledge that we meet on the land of the Gadigal people of the Eora nation and pay respect to their Elders past and present. My thanks to John Graham MLC and the Evatt Foundation for the honour of speaking with you today, and to my respondent, Elly Howse. What better respondent could I have than Labor’s candidate for Balmain, 94 years after Evatt first won that seat for our party? Elly Howse will be a great member for Balmain, and I hope you will support her in that goal.

To speak inhonour of Herbert Vere Evatt is to be reminded of one’s own inadequacies. State parliamentarian at age 31. High Court judge at 36. Attorney General under Curtin. President of the United Nations General Assembly. Leader of the Federal Opposition. Chief Justice of NSW. Author of seminal books on the Rum Rebellion, the royal prerogative, and Labor’s conscription split.

But like many Labor figures of his era, Evatt also had a strong involvement with Rugby League. As you know, the working class game of Rugby League was created in Australia in 1907 because the gentleman’s sport of Rugby Union refused to pay its players. Enforced amateurism was fine for the well-to-do, but working men needed to be compensated for taking time off work. League grew rapidly, soon displacing Union in New South Wales and Queensland. Evatt was one of the many Labor activists involved in League, serving as one of the founders of Sydney University’s Rugby League club.[1] When he first ran for Balmain, Evatt advertised in the official rugby league journal that he was ‘the rugby league candidate’.

Yet despite its egalitarian beginnings, the early decades of League showed the kind of fixed hierarchy that would have made a baron blush. From 1925 to 1929, the winners were South Sydney, South Sydney, South Sydney, South Sydneyand South Sydney. In the post-war era, St George won 11 premierships in a row. Eastern Suburbs, Balmain and Parramatta have won three back-to-back premierships.

Now, if I’ve named yourfavourite team, your first instinct may be to think that there’s nothing better than staying on top of the ladder forever. But if you put team loyalty to a side for a moment, you might think that fans benefit from a sport with a little more unpredictability and fluidity, a bit more of what economists call ‘competitive balance’.

Beginning in the 1970s, League began to get more competitive balance.[2] The High Court’s decision of Buckley v Tutty made it easier for players to move across teams. New clubs were encouraged to enter the competition, with the number of teams almost doubling from the 1970s to the 1990s. In 1990, a salary cap was instituted, limiting the ability of the richest teams to snap up all the best players.

It’s been two decades since any team won back-to-back Rugby League premierships.

The story of Rugby League illustrates that it is possible to move from a static, predictable environment into one that is more fluid, mobile, and surprising. But it didn’t happen by accident. Social mobility on the Rugby League ladder came about because we changed the rules.[3] We allowed new competitors, we let people move around, and we placed limits on what money could buy. Sure, none of it was perfect. A League draft was overturned by a 1991 court decision. Wage restraints in the 1970s. Type ‘NRL salary cap’ into Google, and the next word it will suggest is ‘breaches’. But for all that, League has a good deal more social mobility today than if it was a purely free market. League today is a better game than it was when Doc Evatt and his contemporaries helped found the sport. And whether you’re a Labor or a Liberal voter, you get to enjoy a game where the season premier isn’t predestined at the start of the season.

It turns out that this commitment to mobility isn’t just restricted to the playing field. Most people, regardless of ideology, find the idea of a feudal society distasteful. Across the political spectrum, whether you’re talking to progressives or conservatives, almost everyone believes in a society where a child’s outcomes aren’t predestined from birth.

So, how well does Australia live up to that ideal? One way of answering that question is to look at how much parents’ incomesaffects the incomes of their children, a measure known as the intergenerational elasticity. This lets us see the impact on children’s incomes of a 10 percent increase in parental incomes. If a 10 percent increase in parental incomes boosted children’s incomes by 10 percent, we might conclude that it’s essentially impossible to jump up or down the social hierarchy. If the same increase in parental income had zero impact on children, then we’d be looking at a society where everyone moved across social classes based on their talents, not their parents.

In the United States, a 10 percent increase in parental income translates into about a 5 percent increase in children’s incomes. In Scandinavian nations, it means less than a 2 percent increase. In other words, parental income matters more than twice as much in the United States. So much for the American ‘land of opportunity’, where ‘anyone can make it’. These figures suggest that it’s significantly easier to move from rags to riches in Norway or Denmark than it is in the United States.

In 2007, I carried out the first internationally comparable estimate of Australia’s intergenerationalelasticity, and judged that a 10 percent increase in parental income boosted children’s incomes by around 2½ percent. That suggested Australia is less mobile than Scandinavia, but more mobile than the United States. But in 2017, researchers used the same methodology – with considerably more data – and revised the estimate upwards to 3½ percent.

One way to think about these figures is to compare them with something more familiar – the hereditability of height. It turns out that for every additional 10centimetres of parental height, a child is likely to be around 5 centimetres taller. So in the United States, you’re about as likely to inherit your spot in the social hierarchy from your parents as you are to inherit your height, while in Scandinavia, income is less than half as hereditable as height. In Australia, parental income is two-thirds as hereditable as parental height. If you want to get rich in Australia, choose your parents wisely.

Over the long term, you might think that it all washes out – like the maxim ‘shirtsleeves to shirtsleeves in three generations’.[4] But my research with Greg Clark and Mike Pottenger suggests that status is surprisingly persistent.[5] We focus on rare surnames, held by less than 200 Australians in the modern era. These are names such as Cade, Harbison, Mendelsohn and Zwar. Using records from biographies of high-status individuals, graduation records from Sydney and Melbourne Universities, and convict records, we are able to explore whether those families that were high-status in the 1870s are high-status in the 2010s. Our results show strong persistence over time. Indeed, on this measure, Australia is no more mobile than Britain or the United States.

Someone who has grown up believing in the myth of equal opportunity may find some of these results challenging. But spare a thought for our American friends. In a recent study, Raj Chetty and his co-authors estimated the degree of social mobility in the United States and Canada.[6] In particular, they look at the chance that a child born in the bottom fifth of the income distribution jumps to the top fifth. In the United States, the odds of making such a Horatio Alger style leap are 1 in 13. In Canada, the odds are 1 in 7. They reach the brutal conclusion that you’re twice as likely to realise the American Dream in Canada.

This isn’t just a story about wage earners – it applies to innovators too. We’ve long known that the apple doesn’t fall far from the tree. But it turns out that even if you want to start the next Apple, it helps to grow up around money trees. Combining massive datasets on tax records and patent claims, researchers have shown that inventors are much more likely to have been raised in an affluent household.[7] Compared with children who grew up in the bottom half of the income distribution, a child who grew up in a top 1 percent household is ten times as likely to become an inventor by age 30. Whether someone becomes an inventor has much more to do with their exposure to innovation in childhood than their mathematical and reading abilities. As the authors point out, this implies that there are many ‘lost Einsteins’: people who might have gone on to be great inventors, if only they were given the right environment.

Has intergenerational mobility gotten worse? Not in a relative sense. For the United States, the impact of a parent’s rank in the income distribution on their child’s relative rank is about the same now as it was in the 1970s.[8] Similarly, my own research for Australia does not suggest any major changes in social mobility since the 1960s.[9]

But when it comes to absolute mobility, it’s a different story. Nine out of ten American children born in the 1940s would grow up to earn more than their parents.[10] But by the 1980s, only about half would earn more than their parents. This stagnation of living standards – powerfully captured by Bruce Springsteen in songs like ‘My Hometown’ and ‘Youngstown’ – has been a driver of the opioid epidemic and the increase in suicide rates plaguing the United States at present. Those who argue against economic growth would do well to recognise that the desire to see our children do better than ourselves is a powerful force. It’s no coincidence that ‘deaths of despair’ and an increase in right-wing populism are more prevalent in the regions where economic outcomes are most dismal.

Given all this, I was surprised to see that the Productivity Commission’s recent report took such a sunny view about mobility in Australia, concluding that ‘economic mobility is high in Australia, with almost everyone moving across the income distribution over the course of their lives’. Implicit in this statement is that we should be pleased if we see some movement – in effect that, that the benchmark should be feudalism rather than equal opportunity. If you think that any mobility is good, you’ll be pleased with the status quo. If you think we should aspire to be a nation where babies born into poor households have the same life chances as babies born into rich households, you’ll conclude that we could do a lot better.

A more accurate conclusion would be that reached by Sylvia Mendolia and Peter Siminski, authors of the leading study estimating intergenerational income elasticities for Australia. They conclude that ‘Australia is not particularly mobile in an international context. It is less mobile than the Scandinavian countries as well as Germany, Canadaand New Zealand, but is more mobile than France, Italy the US and the UK.’

To understand how to improve social mobility, we need to start by exploring the main pathways through which parents shape their children’s economic outcomes. Using the full universe of tax returns, Raj Chetty and his collaborators with the Equality of Opportunity Project have mapped intergenerational mobility across the United States.[11] As you’ll recall, the chance of an average child moving from the bottom fifth to the top fifth is 1 in 13. But it turns out that there is wide variation across the nation. In Charlotte, the odds are an appallingly low 1 in 23, while in San Jose they are much better: 1 in 8.

Mapping this variation in mobility, the researchers are able to identify several patterns. High mobility places tend to be less residentially segregated and more equal, suggesting that it’s harder to climb a ladder when the rungs are spaced further apart. Upwardly mobile areas have better primary schools – indicating the power of education to act as an engine of mobility. And regions with more intergenerational mobility appear to have greater family stability and stronger social capital – implying that healthy civic communities are able to improve class-mixing.

Another channel through which intergenerational mobility might entrench itself is via childhood exposure to stressful experiences. A recent study looked at what happened to Canadian children who were in utero in winter1998, when an ice storm collapsed the electric grid, and temperatures plunged below minus 20 degrees. When followed up in their teenage years, children whose families were worst affected by the storm tended to have poorer health, including autoimmune diseases and metabolic diseases.[12]

The most striking aspect of the study is that the stress of the ice storm had led to changes in the epigenome, affecting whatare known as DNA methylation levels. This suggests that our DNA, despite being millions of years old, can be affected by experiences of harsh deprivation when we are very young.

Supporting evidence comes from studies of rats. Some rat mothers are more inclined to care for newborn rats – giving them lots of licking and grooming in their first week – while others spend less energy looking after the young. So researchers randomly assigned rats to high-care and low-care environments.[13] They found that when rats are assigned to a more caring environment, it changes their epigenome. The DNA ends up being programmed differently, in a way that makes the rats less stressed later in life.[14] As researcher Moshe Szyf puts it, this suggests that ‘DNA is not just a sequence of letters. ...  DNA is a dynamic movie. Our experiences are being written into that movie, which is interactive. ’[15]

Intergenerational inequality may even be shaped by differences before birth. Stress, toxinsand micronutrients all affect how a child develops in the womb. Babies born too light (below 2.5 kilograms) or too early (before 37 weeks) are more likely to have health complications, less likely to do well at school, and less likely to earn a decent income.[16]

In richer Australian households, only 3 percent of babies are of low birth weight. In poorer households, that figure is 7 percent. Similarly, in affluent households, only 4 percent of babies are born early. Indisadvantaged household, that figure is 9 percent.[17] The womb is an amazing organ, providing developing babies with all the nutrients they need to grow from a single cell to an infant weighing a few kilograms. But even in that environment, we know that development differs.

So what might we do to increase intergenerational mobility rates in Australia?

First, we need torecognise that ‘start at the beginning’ isn’t ambitious enough. We actually need to start by reducing pre-birth inequality. This requires reducing the share of pregnant mothers who smoke, drink, use drugs or are subject to intimate partner violence. One of the most promising interventions seems to be nurse home visits, though as a Cochrane Review pointed out, we still need to learn more about why some home visiting programs work, while others have no effect.[18] The Cochrane Review also points to some surprising findings, such as the fact that financial incentives seem to be particularly effective in helping pregnant women quit smoking.[19] The vital importance of a healthy pregnancy also reinforces the value of paid parental leave, properly funded legal aid for family violence victims, and the ability to visit a doctor without worrying about the cost.

Second, measures that reduce overall income inequality are also likely to increase mobility. One reason why it is more difficult for a child to move from the bottom fifth to the top fifth of the distribution in certain regions of the United States is that the income gap between those groups is so much greater. Looking across countries, economist Dan Andrews and I found a similar pattern. More inequality – less intergenerational mobility.[20] A more progressive tax system, a more employee-friendly industrial relations system, and competition laws that limit monopoly power are likely to deliver a more equal society, which in turn is likely to lead to greater mobility. It simply doesn’t make sense to say that you care about mobility but not about inequality.

One factor that is shaping both equality and mobility is the decline in the Australianhome ownership rate, which is now as low as it has been since the 1950s. The drop has been especially marked among young people, with the home ownership rate for 25-34 year-olds dropping from 61 percent in 1981 to 45 percent in 2016. Over that period, young people have essentially been priced out of many markets. In the early-1980s, the typical home cost around twice annual income. Now, the typical home costs around five times the average income. Part of the increase is due to the confluence of negative gearing and the capital gains tax discount, which together have greatly increased the incentive for investors to speculate in the housing market. Unlike many other countries, Australians can deduct their interest losses against wage earnings, and then pay a lower tax rate on their capital gains. Labor’s prospective changes to negative gearing and capital gains will rebalance the market away from investors and towards first home buyers.

Analysis of inheritance patterns by the Grattan Institute suggests that the investor bias in our current tax system is entrenching inequality across generations. They point out that most household wealth is held in property, and note that ‘inheritances tend to transmit wealth to children who are already well-off. … If the patterns continue, then on average the younger generation will ultimately have more resources than its parents, but the wealth will be much less equally shared.’[21] The wealthiest fifth of Australians are almost ten times as likely to receive a sizeable inheritance than the poorest fifth.

There are plenty of other policy areas where the impact on children is underappreciated. For example, the Australian incarceration rate is presently as high as it has been since 1901. More than 40,000 Australians are behind bars, including more than 10,000 Indigenous Australians. While data on the children of prisonersis scant, the available evidence suggests that there is at least one child for every person in prison. This suggests that more than 40,000 Australian children currently have a parent behind bars. Prison strains marriages, and children are more likely to have behavioural problems when a parent is in jail. According to US research, the odds that a family falls into poverty rise by 40 percent when a father is incarcerated.[22]

Third, it is vital torecognise the role that quality schooling plays in improving social mobility. For example, children in less advantaged households are less likely to be exposed to reading. One study estimates that in Australian households with highly educated parents, six out of ten children are read to every day.[23] Where parents have low levels of education, that figure falls to three out of ten.

You are no doubt familiar with Australia’s fall in test scores over recent years. From the 1960s to the early-2000s, the literacy and numeracy of14-15 year olds either flatlined or fell slightly.[24] From 2000 to 2015, the international PISA exams show Australian 15 year-olds going backwards in maths, reading and science, with the drop equivalent to 3-6 months of learning.[25] NAPLAN results for grades 3, 5, 7 and 9 show only slight evidence of improvement since 2008.

However, what you may be less aware of is how we’re doing on educational inequality: the gap between students in the top tenth of performers and students in the bottom tenth of performers. This so-called 90/10 gap is a measure of inequality in the schoolsystem, and has been shown to correlate strongly with income inequality.[26] 

Using data from the OECD’s latest PISA exams, I looked at the performance of the top tenth and bottom tenth of test score performers.

Our top tenth of studentsare very good. Not surprisingly, our best outperform the average student in any country – but they also do pretty well against top performers elsewhere. Take a student from the top tenth in any Australian school and send them on exchange to another advanced nation, and – assuming they know the language – they’ll hold their own with the best students there.

But then there’s the bottom tenth. Australia’s lowest-performing students are well below the average in any advanced country. Indeed, if you wanted to find a country where Australia’s bottom tenthare on par, you’d need to be thinking of nations such as Brazil, Indonesia and the Dominican Republic.

Subtract the bottom tenth score from the top tenth score, and you’ve got a measure of educational inequality. For science, mathsand reading, Australia’s level of educational inequality puts us in the top third of the advanced world.[27]

In each of these subjects, the typical student at the 90th percentile is more than five years of achievement ahead of their counterpart at the 10th percentile.[28] Remember that this is a grade 9 test. So the typical student at the 90th percentile is performing at year 12 level, while the typical student at the 10th percentile performs at year 7 level. They’re a whole high school apart.

Without proper funding and evidence-based school policies, these gaps will remain significant. That means not only higher levels ofinequality, but also lower levels of social mobility. Evidence-based education reform is at the core of boosting intergenerational mobility in Australia. That’s why a Labor Government will restore the $14 billion that has been cut from public schools, and put in place an evidence institute for schools, to ensure that education policies are shaped by the best available research.

Fourth, we need to track our performance on intergenerational mobility. Earlier, I was critical of the conclusions reached by the Productivity Commission’s most recent discussion of the issue. In my view, the problem arises because it hasn’t delved deeply into the data, relying instead on putting together the available studies, which are of variable methodologies and quality.

In an important speech titled ‘The Case for Opportunity’, Chris Bowen announced last year that a Labor Government would task the Productivity Commission to produce an Equality of Opportunity Report every five years. Like the Intergenerational Report, it would aim to focus national attention on how Australia is tracking in improving social mobility. As Chris has flagged, this report would be more than a literature review - it would aim to produce fresh estimates of intergenerational mobility in Australia, following the methodological lead of Raj Chetty and the Equality of Opportunity Project. The report might also look at which parts of Australia are the best drivers of social mobility. I would be surprised if such original analysis led to the sanguine conclusion that our nation as a whole cannot improve on the mobility front.

In the National Library’s Albert Namatjira archive, there’s a small black and white photograph of a formal lunch, dated sometime between 1947 and 1950.[29] The image feels candid, but sitting over their cut-crystal dessert bowls we have a trio that could not have come together by chance. Albert Namatjira sits in the middle, hunching slightly forward, with his hands by his side. On his left is Mary Gilmore, in a similar pose. The pair are looking away in the same direction, they are paying attention. Meanwhile, on Namatjira’s right, a serenely self-possessed H.V. Evatt momentarily rests his spoon, while savouring dessert with his eyes shut.

It wouldn’t be fair to say this is a fitting portrait of Evatt, but anyone who knows some details of his life would agree there is something characteristically remote and self-assured captured in that image.

There were many things the self-assured Evatt didn’t see. He didn’t see that defending the rights of minorities was inconsistent with defending the White Australia Policy. He didn’t see that the rules of engagement from the courtroom wouldn’t translate to the parliament. He looked to rely on the iron abstraction of rights and principles and missed the social cues that successful politicians can pick out from watching the crowd. He overstayed his time in public life. As Michael Kirby put it when he delivered the first of these lectures, Evatt at the end of his life was in failing health. ‘In my youth as an articled clerk, I was surrounded by well-groomed young men who mocked this mental giant in his closing months. He was like Lear, disconsolate.’[30]

But in his best days, Evatt saw how Australia could be a better nation.  Herecognised the value of education and family payments in allowing Australians to realise their potential and to retain their ability to choose their own path. As the President of the United Nations General Assembly, he saw very clearly the fundamental significance of asserting a set of rights that all people should have a right to claim, and an obligation to observe.

So – this photo? A trio of equals sharingpride of place on the head table? Could be. After all, at that time, Evatt was one of Australia’s most successful international statesmen and our staunchest advocate for the value and importance of human rights; Mary Gilmore had a whole lifetime behind her of adventure, utopianism and activism; and Albert Namatjira’s paintings had earned him critical acclaim, wealth and international renown.

This image tells a story of equality. But was that story a wishfulfilment? Or perhaps an aspiration?

Not even ten years had passed between this moment and the election of the first woman toAustralian parliament, and it would be nearly two decades before indigenous Australians could apply for citizenship, own a home or cast a vote.

What was the reality, and what are the questions that reality still proposes to us nearly seven decades years later?

The general values that Evatt helped entrench in the Declaration of Human Rights will always provide benchmarks for our aspirations.

It is clear enough though that in some areas, such as reducing racism and sexism, we’ve made distinct progress since the 1950s. And on the sporting field, our competitions tend to be more egalitarian and mobile. It’s not just Rugby League. The story of the GWS Giants could only have happened due to a set of institutions that encourage underdogs and start-ups in the AFL.

On economic inequality, though, we’ve fallen below the levels of Evatt’s era. In the postwar decades, wages grew faster on the factory floor than in the corner office. For the past generation, the reverse has been true. We are becoming a less equal nation. Left unchecked, it is likely that this increase in inequality will also translate to a decrease in mobility.

An immobile society threatens human rights in a way Evatt would have grasped immediately – it depletes individuals’ agency and diminishes their horizons. And if we don’t fix this problem, think of what we’re leaving to future generations of Australians. Consider what kind of Australia it would be if the postcode of a child’s birth determined her destiny.

As one of the architects of the UN charter, Evatt helped draft its talismanic overarching commitment to ‘the dignity and worth of the human person, in the equal rights of men and women and of nations large and small.’

Evatt had worked to deliver this new worldwide forum for rational consensus, diplomacy. He had soared on the wings of high principle, helping to set the lofty pitch of the Universal Declaration, and he had been tenacious in the political clinches to guard the interests of the smaller member nations.

But Evatt has another more prosaic legacy.

As Michael Kirby saw it, when Evatt rallied Australians to defeat the Menzies government’s referendum to ban the Communist Party, he had protected one of the cornerstones of tolerant, modern Australia:

‘…the wonderful thing he safeguarded for us, by a most courageous exhibition of practical idealism, was the pluralist, liberal democracy we livein: accepting diverse opinion. He knew that human rights matter most when small unpopular minorities are threatened.’

Evatt’s principled victory over the meaner instincts behind Menzies’ referendum is worth celebrating for its own sake. But for Michael Kirby, the resolute manner in which Evatt guarded this tradition that he believed in so strongly sets a test for all future generations. His example forces us to ask, again and again, if ‘we are equal to the similar tests of our resolves and to our idealism’ that Evatt faced, and faced down.

None of us want to leave our children a less fair Australia. So we’re faced again with that same test of our principles, and the strength of our resolve to live up to them. Can we live up to the test that Evatt set?